Title: busting the common myth that's leaving many retirees struggling financially
Nearly one in four retirees are struggling to save, with living paycheck to paycheck and unplanned expenses being common hurdles. While these challenges can be tough to overcome, they're not the only reasons some retirees end up short. A misconception about Social Security persists, with nearly 30% of retirees falling for it, according to a recent survey.
Social Security was never meant to be the primary source
When Social Security rolled out, it was only intended to replace around 40% of pre-retirement income for average earners. The income replacement was slightly higher for lower earners and lower for higher earners. Social Security was never envisioned as the sole retirement income source.
On average, retired workers receive about $1,976 per month or $23,712 annually. Married couples might receive a bit more with two checks, amounting to about $3,089 monthly or $37,068 yearly. While this may seem like a substantial amount, it may not be enough to provide a comfortable lifestyle, especially for those with high medical expenses or living in high-cost areas. About 10% of retirees rely on Social Security for at least 90% of their income, which can put them at risk of falling behind on bills or losing their homes if no other sources of income are available.
Alternative income sources
Personal savings are the ideal supplement to Social Security, but they're not always easy to come by. If saving a small amount each month is possible, it can make a big difference when retirement arrives. Investing these funds can help grow your savings over time.
If you're still working, delaying retirement or opting for a part-time retirement could also be smart moves. This provides a steady paycheck while reducing your retirement expenses.
If you're a homeowner and can't return to work, a reverse mortgage could be an option. You can get a lump sum, regular payments, or a line of credit using your home's equity. However, it's essential to be at least 62 years old and have more than 50% equity in your home to qualify.
Government benefits like Supplemental Security Income (SSI) may also be available for lower-income retirees. The maximum benefit is $967 per month for an individual and $1,450 for a married couple, with some states offering additional assistance.
Determining which sources of income are best for your situation can take time and research. If some options aren't viable right now, don't forget to revisit them later.
Enrichment Insights:
There are various sources of retirement income beyond Social Security, such as:
- Annuities (term, life, or variable)
- Bond portfolios and dividend-paying stocks
- Retirement income mutual funds
- Pensions
- Dividends and interest income (from bonds or CDs)
- Retirement accounts (401(k), IRAs)
- Rental income
- Health Savings Accounts (HSAs)
- Qualified Charitable Distributions (QCDs)
- Roth conversions
- Bucket strategy
- Delaying Social Security benefits
- Employer-sponsored retirement plans
Diversifying these sources can help create a flexible and balanced strategy for a secure retirement.
In some instances, retirees might misinterpret Social Security's role, believing it to be their primary source of retirement income. however, Social Security was intended to replace only around 40% of pre-retirement income for average earners.sequently, it's essential to explore alternative income sources during retirement, such as personal savings, investments, part-time employment, reverse mortgages, and government benefits like SSI.